In delivering US approval of its hepatitis C combination Viekira Pak AbbVie might not have pulled off a feat of clinical or regulatory brilliance, but its commercial strategy was something of a coup.
In the hours following the FDA’s decision the largest US pharmacy-benefit manager (PBM), Express Scripts, said it would cover Viekira and exclude Gilead Sciences’ and Johnson & Johnson’s hep C offerings from its formulary for genotype 1 patients – a pronouncement sufficient to shake the sentinel US biotech index today. This was a shot across the bow of pharma executives preparing to launch pricey new speciality drugs in common conditions including cardiovascular disease, psoriasis and asthma.
Let’s make a deal
AbbVie was always reckoned to have a fight on its hands with Viekira given the speed with which single-agent Sovaldi completed pivotal trials and rocketed to double-digit-billion sales, followed by the dual-agent Harvoni in October.
AbbVie, however, had been steadfast in insisting that it would not engage in price competition. Chief executive Richard Gonzalez, in a first-quarter earnings call with analysts, said going with a lower price was “not our strategy going forward”.
In a very technical sense AbbVie is not underpricing Gilead by much. The wholesale acquisition cost is $83,319 for 12 weeks of Viekira, less than $1,000 under Sovaldi and $10,000 under Harvoni; UBS analysts had expected a price of around $76,000 for the AbbVie drug, a combination of Viekirax and Exviera.
Express Scripts stated publicly that it would pay AbbVie less than $83,000, although nobody outside the parties knows exactly what the price is. But the discount was large enough that Express Scripts said it would be able to extend coverage to “all clinically appropriate plan members” with hepatitis C rather than the patients with advanced liver disease – stage 3 or 4 – as had been the case so far (Vantage point – Huge hep C costs prompt search for when and where to treat, August 6, 2014).
Stage 4 liver disease is cirrhosis, and the medical costs of these patients can range from about $23,000 a year in the case of compensated cirrhosis to $60,000 a year for patients with end-stage renal disease.
The new policy takes effect January 1, 2015 and applies specifically to 25 million patients covered by the Express Scripts national preferred formulary – that is, those whose employers contract directly with the PBM to manage the benefit. The PBM says third-party insurers for whom it manages pharmacy benefits will be aware of the national formulary decision and may follow suit. In total, Express Scripts manages benefits for 85 million Americans.
Gilead shares were down 10% to $97.28 and the Nasdaq biotechnology index fell 1% in early trading today. AbbVie rose less than 1% to $68.12, and Enanta, which licensed to AbbVie the paritaprevir (ABT-450) molecule at the core of the Viekira regimen, was up 5% to $48.78.
New tactic in an old game
Formulary lockouts are nothing new in pharma – big names like GlaxoSmithKline and Novo Nordisk have been on the wrong side of these verdicts in the past couple of years with Advair and Victoza respectively. What is different about this choice is the relative youth of the hep C products and the clear decision to negotiate a discount ahead of regulatory approval.
Express Scripts has been leading the payers’ chorus this year in challenging Sovaldi’s high price, so the fact that it followed speech with action ought to make executives throughout the sector take notice.
Next year should see the premiere of such biological drugs as Sanofi and Regeneron’s alirocumab and Amgen’s evolocumab to treat a common condition, high cholesterol, and Novartis’s Cosentyx for psoriasis. Those companies must now be assessing how best to engage Express Scripts and other PBMs in their launch strategies.
It will be interesting to see specifically how aggressive companies sponsoring those heart disease drugs will be, as they have been advancing on similar timelines.
These questions will go all the way up to the chief executives’ offices. After all, 2014 saw Sanofi’s board push out its boss in part because of how competition for Lantus was addressed. Nobody wants to be the next Chris Viehbacher.